Levered / Unlevered Beta Calculator

Set your current beta, debt-to-equity ratio, and tax rate to see how leverage amplifies or strips out equity risk for CAPM, cost of equity, and WACC analysis. Use it to align betas across comparable companies, test alternative capital structures, and connect beta directly to value creation decisions.

By CalcMastery Editorial Team

Beta (Levered/Unlevered) Calculator

Convert between levered equity beta (βL) and unlevered asset beta (βu) using the Hamada relationship, based on a debt-to-equity ratio and corporate tax rate. Clean, focused UX with helpful tooltips, scenarios, and a concise What It Means panel.

Levered β (βL)Unlevered β (βu)

Use Levered β to estimate equity risk at a given capital structure. Use Unlevered β to compare underlying business risk across companies with different leverage.

Beta of the business as if financed with 100% equity (no debt). Often derived by unlevering comparable companies.

Observed or estimated equity beta at the current capital structure (includes the effect of financial leverage).

Market value of debt divided by market value of equity at the capital structure used for beta. Use D/E = 0 for an all-equity firm.

%

Marginal corporate tax rate used in the Hamada formula. Enter as a percentage (for example, 25 for 25%).

Scenarios
Quick presets for typical capital structure profiles when unlevering or relevering beta.
Unlever a leveraged companyRelever to higher D/ELow leverage, stable businessAll-equity firm (D/E = 0)

Results

  • Levered beta (βL)—
  • Unlevered beta (βu)—
  • Risk profile—

Enter your inputs above to calculate the results.

What is Levered vs Unlevered Beta?

Levered beta (equity beta) measures how sensitive a company’s equity returns are to broad market movements after factoring in financial leverage; it captures both business risk and the extra volatility created by debt in the capital structure.

Unlevered beta (asset beta) strips out the impact of debt and tax shields, isolating the pure business risk of the underlying assets so you can compare companies on a like-for-like basis and then re-apply a target debt-to-equity ratio. Together they sit at the core of CAPM, cost of equity, and WACC, linking capital structure choices to valuation, hurdle rates, and shareholder value.

Formula

Standard Hamada-form style relationships between levered and unlevered beta:

    • Levered beta (given unlevered beta):
betaL = betaUleft[1 + (1-T)D / E]
    • Unlevered beta (given levered beta):
betaU = betaL / (1 + (1-T)D / E)

where:

  • betaL = levered (equity) beta
  • betaU = unlevered (asset) beta
  • T = corporate tax rate
  • D / E = debt-to-equity ratio based on market values

Example

1. Computing levered beta from unlevered beta

A business has an unlevered beta of 0.8, a target debt-to-equity ratio of 0.5, and a corporate tax rate of 25%. Using the formula:

betaL = 0.8[1 + (1-0.25) × 0.5] = 0.8 × 1.375approx1.10

Equity in this capital structure is slightly more volatile than the market, so CAPM will return a higher cost of equity than for an otherwise unlevered firm.

2. Computing unlevered beta from levered beta

A listed company shows a levered beta of 1.2 with the same $D/E=0.5$ and tax rate $T=25%$. The implied unlevered (asset) beta is:

betaU = 1.2 / (1 + (1-0.25) × 0.5) = 1.2 / 1.375approx0.87

Analysts can now use $beta_Uapprox0.87$ as a clean business-risk beta for peer comparison, then re-lever it to any target capital structure for valuation, cost of equity, and WACC scenarios.

How to Use the Levered / Unlevered Beta Calculator

This calculator lets you either add leverage to an unlevered (asset) beta or strip leverage out of a levered (equity) beta using the firm’s debt-to-equity ratio and tax rate.

Choose the beta you want to compute

  • In the “Beta to compute” toggle at the top, select either Levered β (βL) or Unlevered β (βU) depending on what you need for your analysis.

Enter the known beta

    • If you chose Levered β (βL), type your Unlevered beta (βU) into the corresponding input.

- If you chose Unlevered β (βU), type your Levered beta (βL) instead.

Set capital structure and tax assumptions

  • Fill in the Debt-to-equity ratio (D/E) using your firm’s (or target) leverage and the Corporate tax rate (T) in percent.

Review the results panel

  • Check the Results box to see both betas side by side (levered and unlevered) along with a qualitative risk profile label that tells you whether the equity behaves roughly like the market, more defensive, or more aggressive.

Interpret and apply the beta

  • Use the calculated levered beta in your CAPM cost of equity or valuation model, or use the unlevered beta to compare business risk across peers or to re-lever at a different target capital structure.

Frequently Asked Questions

How do I calculate levered beta from unlevered beta, debt-to-equity, and tax rate?

Use the standard relevering formula:

betaL = betaUtimes[1 + (1-T) × (D / E)]

where

betaL

is levered (equity) beta,

betaU

is unlevered (asset) beta,

T

is the corporate tax rate, and

D / E

is the company’s debt-to-equity ratio.

How do I back out unlevered beta from a reported equity beta?

Start from the published equity beta and de-lever it:

betaU = betaL / (1 + (1-T) × (D / E))

using the same tax rate and debt-to-equity ratio that correspond to the beta you’re adjusting.

Should I use book or market debt-to-equity in this calculator?

For valuation work, use market values where possible (market value of equity and current market value of debt or net debt), and preferably your target D/E ratio rather than a temporary spike or one-off capital structure.

When should I use unlevered beta vs. levered beta?

Use unlevered beta to compare pure business risk across peers and to build a beta for a project or private company; then re-lever it to your target D/E and plug the resulting levered beta into CAPM to estimate the cost of equity.

Sources & Methodology